Cash Problems Proof of Cash
Cash Problems Proof of Cash
In your audit of National Inc.’s cash account as of December 31, 2014, you ascertained the following
information:
The bookkeeper’s bank reconciliation on November 30, 2014, is as follows:
Bank balance per bank statement, November 30 P24,298
Add: Deposit in transit 3,648
Total P27,946
Less: Outstanding checks
No. 3408 P440
3413 300
3414 6,820
3416 3,924
3417 800 12,284
Balance P15,662
Add: Bank service charge for November 36
Book balance per General ledger, November P15,698
* Entered in Check Register in December
The cash Receipts Journal shows a total receipts for December of P371,766. The Check Register reflects
totals checks issued in December of P377,632. A collection of P5,912 was recorded on company books
on December 31 but was not deposited until January 2, 2015.
The balance per bank statement at December 31, 2014, is P17,516. This statement shows total receipts
of P373,502 and checks paid of P380,284.
PROBLEM 2
The following data are assembled by the accountant of Angel Trading:
Nov. 30, 2013 Dec. 31, 2013
Balance per accounting records P 16,470 P 40,285
Balance per bank statement 107,082 137,817
Undeposited collections 8,201 12,880
Unpresented checks 27,718 30,112
Bank charges 720 600
DAUD* - 8,250
Notes placed in the bank for collection, collected by the bank 71,815 80,900
* Redeposited in the same month. No entries are made to book the return and redeposit. (Assume that these are
to be treated as book reconciling items)
The bank statement and the company’s cash records show the following totals:
PROBLEM 3
Your audit senior instructed you to prepare a four column proof of cash receipts and disbursements for the month
of December, 2013.
The bank reconciliation prepared by Bitter Trading at November 30 is reproduced below:
The December bank statement, which has a beginning balance of P96,800, is reproduced below:
The company’s cash receipts and cash disbursements journals for the month of December 2009 are provided
below:
Questions:
7. How much is the outstanding checks as of December 31, 2013?
A. P 208,000 B. P 232,800 C. P 216,800 D. P 224,000
8. How much is the adjusted book receipts for December, 2013?
A. P 985,200 B. P 771,600 C. P 913,200 D. P 904,800
9. How much is the adjusted book disbursements for December, 2013?
A. P 347,840 B. P 348,000 C. P 332,000 D. P 339,200
10. How much is the adjusted cash balance as of December 31, 2013?
A. P 664,000 B. P 688,800 C. P 680,000 D. P 672,800
11. How much is the cash shortage as of December 31, 2013?
A. P 24,240 B. P 23,840 C. P 15,840 D. P0
PROBLEM 4
For the purpose of preparing proof of cash, Strong Company compiled the following data:
Additional data:
Banks service charges in May were P 1,200.
There were no outstanding checks in both months. Deposits in transit were P 28,500 in May and P 4,000
in June.
The company recorded the June NSF check in its books in June, but treated the check as reduction to cash
receipts.
PROBLEM 5
The following information pertains to the Cash in Bank account of Lagao Distributors, Inc. or the month of April,
2013:
Balances per bank statement March 31, P 21,560, and April 30, P 23,040.
Balances of Cash in Bank account in Lagao’s books: March 31, P 16,545, and April 30, P 22,680.
Total receipts per books were P 222,190 of which P 1,210 was paid in cash to a creditor on April 16.
Undeposited receipts were: March 31, P 9,060 and April 30, P 10,120.
Outstanding checks were: March 31, P 2,675 and April 30, P 1,930, of which a check for P 500 was certified by
the bank on April 22.
Collections by the bank not recorded by Lagao were P 12,150 in March, and P 11,640 in April.
Bank service charges not entered in Lagao’s books were: March 31, P 750, and April 30, P 420.
A check for P 950 of Lugaw was charged to the account of Lagao in error.
A check drawn for P 840 was erroneously entered in the books as P 480.
PROBLEM 6
In the audit of Maya Inc.’s cash account, you obtained the following information:
The company’s bookkeeper prepared the following bank reconciliation as of November 30, 2013:
Check No. 2318 dated November 25, 2013, was entered as P 15,000 in payment of a voucher for P 150,000.
Upon examination of the checks returned by the bank, the actual amount of the check was P 150,000.
Check No. 2902 dated December 20, 2013 was issued to replace a mutilated check (no. 2400), which was
returned by the payee. Both checks were recorded in the amount drawn, but no entry was made to cancel
check no. 2400.
The December bank statement included a check drawn by KANLURAN TRADING for P 7,500.
The service charge for December was P 750. This was charged by the bank to another client.
The bank collected a note receivable of P 35,000 on December 28, 2011, but the collection was not received
on time to be recorded by SILANGAN.
PROBLEM 7: The accountant for the Muntinlupa Company assembled the following data:
June 30 July 31
Cash account balance P 15,822 P 39,745
Bank statement balance 107,082 137,817
Deposits in transit 8,201 12,880
Outstanding checks 27,718 30,112
Bank service charge 72 60
Customer's check deposited July 10, returned by bank on July 8,250
16 marked NSF, and redeposited immediately; no entry
made on books for return or redeposit
Collection by bank of company's notes receivable 71,815 80,900
The bank statements and the company's cash records show these totals:
QUESTIONS:
Based on the application of the necessary audit procedures and appreciation of the above data, you are to provide the answers
to the following:
Problem 8: You are auditing the cash account of Carrera Inc. for the fiscal year ended July 31,2014. The
client has not prepared the July 31, bank reconciliation. The following information were made available:
Audit notes:
a. Bank reconciliation in June included the following information: bank statement balance, June,
P172,590; Deposit in transit, P18,000; Outstanding checks, P52,2260, and; Balance per general
ledger, June P140,330.
b. Checks clearing the bank in July, outstanding by the end of June was at P50,760.
c. Check clearing the bank in July and were recorded in July cash disbursement journal was at
P614,010.
d. A check for P31,800 cleared the bank, but had not been recorded in the cash disbursement
journal. It was for a payment of an accounts payable.
e. A check for P11,800 was erroneously charged by the bank to Carrera Inc.
f. Deposits included P18,000 from June and P733,680 from July.
g. The bank charged Carrerra Inc.’s account for a non-sufficient-fund check totaling to P9,330. The
credit manager concluded that the customer intentionally closed its account and the owner left
the city. The check was turned over to a collection agency.
h. A note for P174,000, plus interest, was paid directly by the bank under an agreement signed
four months ago. The note payable was recorded at P 174,000 on Carrera Inc.’s books.
Required: based on your audit procedures and appreciation of the above data, answer the following:
Problem 9: You are auditing the cash of Saluyot Corp. for the fiscal year ended September 30,2014.
The bank reconciliation prepared by the accountant of Saluyot Corp. for the months of August is presented
below:
There was no available bank reconciliation for the month of September, instead, the accountant provided you
a copy of the September bank statement to aid you in your audit.
The September bank statement included the following bank debits and credits:
Particulars Debits Credits
Date:
August 31 Chk. #561 5,400 2,700
September 1 Chk. #562 4,200
September 9 Chk. #565 1,800 30,000
September 12 420 DM 420
September 15 Chk. #566 3,000
September 17 600
September 20 Chk. #567 2,100 42,000
September 27 Chk. #569 4,320
September 29 300 EC 300 EC
September 30 1,320 SV
September 30 900 DM
September 30 Chk. #570 5,460
SV- Service charges DM- Debit Memo
EC- Errors Corrected CM—Credit Memo
SOLUTIONS:
Proof of Cash, September 30,2014
Problem 10: Laser Corp. has a current account in PNB. Your audit of the company’s cash account reveals the
following:
Proof of Cash
December 31, 2014
Nov. 30 Receipts Disbursements Dec.31
Unadjusted book balance 637,860 306,220 367,660 576,420
Note collected by the bank in Dec. 2,060 2,060
Bank service charged in Nov. (60) (60)
Overstatement of Dec. book
disbursement( 3,000-2,020) (980) 980
Check stopped for payment* (780) (780)____________________
ADJUSTED BALANCES 637,800 307,500 365,840 579,460
PROBLEM 11
In the audit of Tina Company’s cash account, you obtained the following information:
The company’s bookkeeper prepared the following bank reconciliation as of November 30, 2015:
Bank balance – November 30, 2015 P90,800
Undeposited collections 5,000
Bank service charges 100
Bank collection of customer’s note (8,000)
Outstanding checks:
Number Amount
7159 P3,000
7767 5,000
7915 2,000 (10,000)
Book balance – November 30, 2015 P77,900
The service charge for December was P150 which was charged by the bank to another client.
The bank collected a note receivable of P7,000 on December 28, 2015, but the collection was not received on time
to be recorded by Tina.
Suggested Solution:
Question No. 1
Question Nos. 2 to 5
Pasig Company
Proof of Cash
For the month ended December 31, 2006
Beginning Ending
Nov. 30 Receipts Disb. Dec. 31
a
(P90,800 + P169,000 – P123,800)
Answers: 1) A; 2) C; 3) C; 4) D; 5) B
Shown below is the bank reconciliation for Marikina Company for November 2006:
Balance per bank, Nov. 30, 2006 P150,000
Add: Deposits in transit 24,000
Total 174,000
Less: Outstanding checks P28,000
Bank credit recorded in error 10,000 38,000
Cash balance per books, Nov. 30, 2006 P136,000
The bank statement for December 2006 contains the following data:
Total deposits P110,000
Total charges, including an NSF check of P8,000 and a
service charge of P400 96,000
All outstanding checks on November 30, 2006, including the bank credit, were cleared in the bank 1n
December 2006.
There were outstanding checks of P30,000 and deposits in transit of P38,000 on December 31, 2006.
Questions:
Based on the above and the result of your audit, answer the following:
1.How much is the cash balance per bank on December 31, 2006?
a. P154,000 c. P164,000
b. P150,000 d. P172,400
2.How much is the December receipts per books?
a. P124,000 c. P110,000
b. P 96,000 d. P148,000
Suggested Solution:
Question No. 1
Balance per bank, Nov. 30, 2006 P150,000
Add: Total deposits per bank statement 110,000
Total 260,000
Less: Total charges per bank statement 96,000
Balance per bank, Dec. 31, 2006 P164,000
Question No. 2
Total deposits per bank statement P110,000
Less deposits in transit, Nov. 30 24,000
Dec. receipts cleared through the bank 86,000
Add deposits in transit, Dec. 31 38,000
December receipts per books P124,000
Question No. 3
Total charges per bank statement P96,000
Less: Outstanding checks, Nov. 30 P28,000
Correction of erroneous bank credit 10,000
December NSF check 8,000
December bank service charge 400 46,400
Dec. disb. cleared through the bank 49,600
Add outstanding checks, Dec. 31 30,000
December disbursements per books P79,600
Question No. 4
Balance per books, Nov. 30, 2006 P136,000
Add December receipts per books 124,000
Total 260,000
Less December disbursements per books 79,600
Balance per books, Dec. 31, 2006 P180,400
Question No. 5
Balance per bank statement, 12/31/06 P164,000
Deposits in transit 38,000
Outstanding checks ( 30,000)
Adjusted bank balance, 12/31/06 P172,000
Answers: 1) C; 2) A; 3) B; 4) C; 5) C
PROBLEM NO. 8
The accountant for the Muntinlupa Company assembled the following data:
June 30 July 31
Cash account balance P 15,822 P 39,745
Bank statement balance 107,082 137,817
Deposits in transit 8,201 12,880
Outstanding checks 27,718 30,112
Bank service charge 72 60
Customer's check deposited July 10, returned by 8,250
bank on July 16 marked NSF, and redeposited
immediately; no entry made on books for return or
redeposit
Collection by bank of company's notes receivable 71,815 80,900
The bank statements and the company's cash records show these totals:
QUESTIONS:
Based on the application of the necessary audit procedures and appreciation of the above data, you are
to provide the answers to the following:
1.How much is the adjusted cash balance as of June 30?
a. P87,565 c. P107,082
b. (P3,695) d. P15,822
2.How much is the adjusted bank receipts for July?
a. P253,787 c. P245,537
b. P214,802 d. P232,881
3.How much is the adjusted book disbursements for July?
a. P220,767 c. P181,782
b. P212,517 d. P206,673
4.How much is the adjusted cash balance as of July 31?
a. P137,817 c. P22,513
b. P112,335 d. P120,585
5.How much is the cash shortage as of July 31?
a. P8,250 c. P196,144
b. P71,815 d. P0
Suggested Solution:
Muntinlupa Company
Reconciliation of Receipts, Disbursements, and Bank Balance
For the month ended July 31
Beginning Ending
June 30 Receipts Disb. July 31
Balance per bank
statement P107,082 P249,108a P218,373 P137,817
Deposits in transit:
June 30 8,201 (8,201)
July 31 12,880 12,880
Outstanding checks:
June 30 (27,718) (27,718)
July 31 30,112 (30,112)
NSF check redeposited
(8,250) (8,250)
Adjusted bank balance
P 87,565 P245,537 P212,517 P120,585
Answers: 1) A; 2) C; 3) B; 4) D; 5) D
You obtained the following information on the current account of Parañaque Company during your
examination of its financial statements for the year ended December 31, 2006.
The bank statement on November 30, 2006 showed a balance of P306,000. Among the bank credits in
November was customer’s note for P100,000 collected for the account of the company which the
company recognized in December among its receipts. Included in the bank debits were cost of
checkbooks amounting to P1,200 and a P40,000 check which was charged by the bank in error against
Parañaque Co. account. Also in November you ascertained that there were deposits in transit
amounting to P80,000 and outstanding checks totaling P170,000.
The bank statement for the month of December showed total credits of P416,000 and total charges of
P204,000. The company’s books for December showed total debits of P735,600, total credits of
P407,200 and a balance of P485,600. Bank debit memos for December were: No. 121 for service
charges, P1,600 and No. 122 on a customer’s returned check marked “Refer to Drawer” for P24,000.
On December 31, 2006 the company placed with the bank a customer’s promissory note with a face
value of P120,000 for collection. The company treated this note as part of its receipts although the bank
was able to collect on the note only in January, 2007.
A check for P3,960 was recorded in the company cash payments books in December as P39,600.
QUESTIONS:
Based on the application of the necessary audit procedures and appreciation of the above data, you are
to provide the answers to the following:
1.How much is the undeposited collections as of December 31, 2006?
a. P339,600 c. P219,600
b. P179,600 d. P139,600
2.How much is the outstanding checks as of December 31, 2006?
a. P191,960 c. P361,960
b. P397,600 d. P363,160
3.How much is the adjusted cash balance as of November 30, 2006?
a. P216,000 c. P176,000
b. P256,000 d. P157,200
4.How much is the adjusted bank receipts for December?
a. P635,600 c. P475,600
b. P515,600 d. P435,600
5.How much is the adjusted book disbursements for December?
a. P395,960 c. P225,960
b. P431,600 d. P397,160
6.How much is the adjusted cash balance as of December 31, 2006?
a. P625,640 c. P220,000
b. P195,640 d. P375,640
Suggested Solution:
Question No. 1
Deposits in transit, 11/30/06 P80,000
Add collections in December:
December book receipts P735,600
Less receipts not representing
collections in December:
Customer’s note collected by bank
in Nov. recorded in Dec. P100,000
Uncollected customer's note
treated as receipts 120,000 220,000 515,600
Total 595,600
Question No. 2
Outstanding checks, 11/30/06 P170,000
Add checks issued in December:
December book disbursements P407,200
Less disbursements not
representing checks issued in
December:
Bank service charge, Nov.;
recorded Dec. P1,200
Question Nos. 3 to 6
Parañaque Company
Proof of Cash
For the month ended December 31, 2006
Beginning Ending
Nov. 30 Receipts Disb. Dec. 31
Balance per bank
statement P306,000 P416,000 P204,000 P518,000a
Deposits in transit:
November 30 80,000 (80,000)
December 31 219,600 219,600
Outstanding checks:
November 30 (170,000) (170,000)
December 31 361,960 (361,960)
Erroneous bank debit-
November 40,000 (40,000)
Adjusted bank balance
P256,000 P515,600 P395,960 P375,640
a. The bank statement for the month of December showed total credits of P240,000 while the
debits per books totaled P735,000.
b. NSF checks are recorded as a reduction of cash receipts. NSF checks which are later
redeposited are then recorded as regular receipts. Data regarding NSF checks are as follows:
1. Returned by the bank in Nov. and recorded by the company in Dec., P10,000.
2. Returned by the bank in Dec. and recorded by the company in Dec., P25,000.
3. Returned by the bank in Dec. and recorded by the company in Jan., P29,000.
c. Check of Pasaway Company amounting to P90,000 was charged to the company’s account by
the bank in error on December 31.
d. A bank memo stated that the company’s account was credited for the net proceeds of Anito’s
note for P106,000.
e. The company has hypothecated its accounts receivable with the bank under an agreement
whereby the bank lends the company 80% of the hypothecated accounts receivable. The
company performs accounting and collection of the accounts. Adjustments of the loan are
made from daily sales reports and deposits.
f. The bank credits the company account and increases the amount of the loan for 80% of the
reported sales. The loan agreement states specifically that the sales report must be accepted
by the bank before the company is credited. Sales reports are forwarded by the company to
the bank on the first day following the date of sale. The bank allocates each deposit 80% to
the payment of the loan, and 20% to the company account. Thus, only 80% of each day’s
sales and 20% of each collection deposits are entered on the bank statement. The company
accountant records the hypothecation of new accounts receivable (80% of sales) as a debit to
Cash and a credit to the bank loan as of the date of sales. One hundred percent of the
collection on accounts receivable is recorded as a cash receipt; 80% of the collection is
recorded in the cash disbursements books as a payment on the loan. In connection with the
hypothecation, the following facts were determined:
Included in the undeposited collections is cash from the hypothecation of accounts
receivable. Sales were P180,000 on November 30, and P200,000 at December 31. The
balance was made up from collections which were entered on the books in the manner
indicated above.
Collections on accounts receivable deposited in December, other than deposits in transit,
totaled P725,000.
g. Interest on the bank loan for the month of December charged by the bank but not recorded in
the books, amounted to P38,000.
QUESTIONS:
Based on the above and the result of your audit, answer the following:
1. How much is the adjusted cash balance as of November 30, 2006?
a. P574,000 c. P430,000
b. P394,000 d. P350,000
2.How much is the adjusted book receipts for December, 2006?
a. P860,000 c. P876,000
b. P280,000 d. P296,000
3.How much is the adjusted book disbursements for December, 2006?
a. P180,000 c. P180,000
b. P905,000 d. P760,000
4.How much is the adjusted cash balance as of December 31, 2006?
a. P690,000 c. P440,000
b. P530,000 d. P490,000
5.How much is the cash shortage as of December 31, 2006?
a. P32,000 c. P8,000
b. P90,000 d. P0
Suggested Solution:
Pasay Company
Proof of Cash
For the month ended December 31, 2006
Beginning Ending
Nov. 30 Receipts Disb. Dec. 31
Balance per bank
statement P480,000 P240,000 P300,000a P420,000
Deposits in transit:
November 30 100,000c (100,000)
December 31 140,000d 140,000
Outstanding checks:
November 30 (150,000) (150,000)
December 31 120,000 (120,000)
Erroneous bank debit-
December (90,000) 90,000
Deposits with loan
payment (P725,000 x
80%) 580,000 580,000
Adjusted bank balance
P430,000 P860,000 P760,000 P530,000
Anticipated loan
payment from
undeposited
collections:
Nov. 30
(P100,000 x 80%) 80,000 80,000
Dec. 31
(P140,000 x 80%) (112,000) 112,000
Interest charge for bank
loan in Dec. 38,000 (38,000)
Adjusted book
balance P430,000 P860,000 P760,000 P530,000
a
(P480,000 + P240,000 – P420,000)
b
(P504,000 + 735,000 – P539,000)
c[
P244,000 – (P180,000 x 80%)]
d[
P300,000 – (P200,000 x 80%)]
Answers: 1) C; 2) A; 3) D; 4) B; 5) D
PROBLEM NO. 14
You were engaged to audit the accounts of Taguig Corporation for the year ended December 31, 2006. In your
examination, you determined that the Cash account represents both cash on hand and cash in bank. You further noted
that the company’s internal control over cash is very poor.
You started the audit on January 15, 2007. Based on your cash count on this date, cash on hand amounted to P19,200.
Examination of the cash book and other evidence of transactions disclosed the following:
Total duplicate deposit slips, all dated January, P44,000. This amount includes a deposit representing collections on
December 31.
Cash book balance at December 31, 2006 amounted to P186,000, representing both cash on hand and cash in bank.
An amount of P4,400 representing proceeds of a clean draft on a customer was credited by bank, but is not yet taken up
in the company’s books.
The company cashier presented to you the following reconciliation statement for December, 2006, which he has
prepared:
QUESTIONS:
Based on the above and the result of your audit, answer the following:
Suggested Solution:
Question No. 3
Collections per records P75,200
Add undeposited collections, Dec. 31 20,000
Total cash that should be deposited in January 95,200
Less January deposits 44,000
Undeposited collections, Jan. 15 51,200
Less undeposited collections per cash count 19,200
Shortage, Jan. 1 to 15, 2007 P32,000
Question No. 4
Cover-up for the December 31, 2006 shortage:
Non-recording of bank collection P 4,400
Understatement of book balance
(P186,000 - P180,600) 5,400
Understatement of outstanding checks (P46,000 -
P10,600) 35,400
Overstatement of undeposited collections (P20,400 -
P20,000) 400
Total shortage, December 31, 2006 P45,600
Answers: 1) B; 2) A; 3) D; 4) A